Employment in India

Introduction

Employment is a cornerstone of economic and social development. It refers to the state of having a paid job or being engaged in an economic activity that contributes to the Gross National Product (GNP). Studying employment is crucial as it helps us understand the structure of our economy, the standard of living of our people, and the extent of poverty and inequality in the country.

An economic activity is any activity that results in the production of goods and services and adds value to the national income. All individuals engaged in such activities are considered 'workers'. The nature and extent of employment in a country are indicators of its economic health. High levels of employment signify economic growth and prosperity, while high unemployment points to economic distress and underutilised human resources. This chapter explores the key concepts related to employment in the Indian context, including the size of the workforce, participation rates, sectoral distribution, and the challenges of unemployment and informalisation.

Workers And Employment

A worker is an individual who is engaged in any economic activity, whether for another person or for themselves. This includes all persons who work and get paid for it, as well as those who are self-employed and those who assist in a family enterprise without a direct salary (unpaid family helpers).

The term 'worker' is not limited to those in factories or offices. It encompasses farmers, agricultural labourers, shopkeepers, doctors, engineers, and even people working in their homes, like weavers or artisans. The nature of employment for these workers can vary significantly, ranging from year-round work to work for only a few months in a year.

Statisticians in India typically consider all persons who were engaged in an economic activity for any part of the preceding year as workers. The total number of such individuals is referred to as the workforce of the country. Employment, therefore, is a situation where a worker is actively engaged in a productive, paid or unpaid, economic activity.

Participation Of People In Employment

To understand the level of employment in a country, we use an indicator called the Worker-Population Ratio (WPR). This ratio is a measure of the proportion of a country's population that is actively engaged in economic activities.

Worker-Population Ratio (WPR)

The WPR is calculated by dividing the total number of workers by the total population and multiplying the result by 100.

Formula:

$ \text{WPR} = \frac{\text{Total Number of Workers}}{\text{Total Population}} \times 100 $

A higher WPR indicates that a larger proportion of the population is involved in productive activities. WPR is analyzed across different segments like rural vs. urban areas and male vs. female population to understand the dynamics of the labour market.

Answer:

In India, there are significant differences in WPR across rural-urban and male-female categories. Generally, the WPR is higher in rural areas than in urban areas, mainly because a larger proportion of the rural population, including women and children, participates in agricultural activities. The WPR for men is consistently higher than for women across both rural and urban areas, highlighting the low participation of women in the workforce.

Source: Periodic Labour Force Survey (PLFS), 2017-18. Note: Figures are approximate for illustration.

Self-employed And Hired Workers

The status of a worker in an economy can be broadly classified into three categories. This classification helps in understanding the quality of employment and the degree of vulnerability of the workforce.

Categories of Workers

1. Self-employed Workers: These are individuals who own and operate an enterprise to earn their livelihood. They use their own resources (land, labour, capital) and bear the risks of the business. A large majority of India's workforce falls into this category. Examples include farmers, shopkeepers, small business owners, and professionals like doctors and lawyers with their own clinics or firms.
2. Regular Salaried Employees: These are workers hired by an employer on a regular basis. They receive a fixed salary or wage and are often entitled to social security benefits like provident fund, pension, and gratuity. Government employees, bank officials, and permanent workers in large companies are examples of this category. They have better job security compared to other categories.
3. Casual Wage Labourers: These workers are engaged on a day-to-day or short-term basis and are not on any permanent payroll. They are paid a daily or periodic wage for the work done. They have no job security, do not receive social security benefits, and are the most vulnerable group of workers. Construction workers and many agricultural labourers fall into this category.

The distribution of the workforce across these categories provides insights into the structure of employment in India.

Source: PLFS, 2017-18. Note: Figures are approximate for illustration.

The table shows that self-employment is the dominant form of employment in India, followed by casual wage labour. The proportion of regular salaried employees is relatively small, reflecting the prevalence of informal employment arrangements in the country.

Employment In Firms, Factories And Offices

Another important way to analyze the employment structure is by looking at the distribution of the workforce across different industrial sectors. The economy is generally divided into three main sectors:

Three Sectors of the Economy

1. Primary Sector: This sector involves the extraction and harvesting of natural products. It includes agriculture, forestry, fishing, and mining. In India, this sector is the largest employer, although its contribution to the Gross Domestic Product (GDP) has declined significantly over the years.
2. Secondary Sector: This sector involves the processing of raw materials from the primary sector into finished goods. It is also known as the industrial sector and includes manufacturing, construction, and electricity, gas, and water supply.
3. Tertiary Sector: This sector provides services rather than producing goods. It is also known as the service sector and includes activities like trade, transport, storage, communications, banking, insurance, IT, real estate, and public administration.

The following table shows the distribution of the workforce in India across these three sectors, highlighting the continued dominance of the primary sector in providing employment.

Source: PLFS, 2017-18. Note: Figures are approximate for illustration.

While over 44% of the workforce is engaged in the primary sector, its contribution to India's GDP is less than 20%. In contrast, the tertiary sector employs about 31% of the workforce but contributes over 50% to the GDP. This imbalance indicates low productivity and disguised unemployment in the agricultural sector.

Growth And Changing Structure Of Employment

Over the past few decades, the Indian economy has undergone significant structural changes. The contribution of different sectors to GDP has shifted dramatically, with a decline in the share of agriculture and a rise in the share of services. However, the change in the employment structure has not kept pace with the change in the GDP structure.

This has led to a peculiar situation where the workforce is still largely dependent on the primary sector, even as its economic importance diminishes. The process of workers moving from agriculture to industry and services has been very slow. This trend is in contrast to the development path of many Western countries, where a shift out of agriculture was followed by a massive expansion of the manufacturing sector.

The Phenomenon of 'Jobless Growth'

A significant concern in India's development story has been the phenomenon of "jobless growth". This refers to a situation where the economy's GDP grows at a healthy rate, but the rate of employment generation is very low or stagnant. In other words, economic growth does not translate into a proportional increase in jobs.

This happens when growth is driven by sectors or technologies that are capital-intensive rather than labour-intensive. For example, growth in highly automated manufacturing or high-tech service industries might increase GDP significantly but create relatively few jobs. This poses a major challenge for a labour-surplus country like India, where millions of young people enter the job market every year.

The changing structure of employment also sees a move towards 'casualisation' and 'informalisation', where more workers are engaged in casual or informal jobs rather than secure, regular salaried positions.

Informalisation Of Indian Workforce

One of the most defining features of the Indian labour market is its division into the formal and informal sectors. This division is crucial for understanding the quality of employment and the vulnerability of workers.

Formal Sector Employment

The Formal or Organised Sector comprises all public sector establishments and those private sector establishments which employ 10 or more hired workers. Workers in this sector are known as formal sector workers.

Characteristics of Formal Sector Employment:

• Job Security: Workers have regular contracts and protection against arbitrary dismissal.
• Social Security Benefits: They are entitled to benefits like provident fund, pension, health insurance, and paid leave.
• Right to Organise: Workers can form trade unions to bargain for better wages and working conditions.
• Regulation: These establishments are governed by various labour laws.

The Informal or Unorganised Sector includes all private enterprises that hire fewer than 10 workers. This sector, along with farmers, agricultural labourers, and self-employed individuals not in the formal sector, constitutes the informal economy. A staggering 90% or more of India's workforce is employed in the informal sector.

Informalisation is the process whereby the proportion of the workforce in the informal sector increases, or when jobs in the formal sector begin to exhibit characteristics of informal employment (e.g., hiring workers on contract without social security benefits).

Informalisation In Ahmedabad

A classic example of informalisation can be seen in the city of Ahmedabad, which was once known as the 'Manchester of India' due to its thriving textile industry. In the 1970s and 1980s, the city had a large number of composite textile mills that provided formal sector employment to lakhs of workers.

Over time, due to a combination of factors including competition, technological changes, and labour disputes, a majority of these large mills closed down. The textile production did not stop; instead, it shifted from the large, organised mills to smaller, decentralised power-loom units. These power-looms operate in the informal sector.

This shift had major consequences for the workers:

• Loss of Formal Jobs: Lakhs of workers lost their secure, regular salaried jobs in the mills.
• Rise of Informal Work: Many of these workers were forced to take up work in the informal power-loom units, where wages were lower, working conditions were poor, and there were no social security benefits or job security.

The story of Ahmedabad's textile industry is a powerful illustration of the process of informalisation, where formal sector employment declined and was replaced by more precarious informal sector work.

Unemployment

Despite having a large workforce, India faces the significant challenge of unemployment. The National Statistical Office (NSO) defines unemployment as a situation in which a person is actively seeking work at the prevailing wage rate but is unable to find any. It is important to note that only people in the labour force (those who are able and willing to work) can be considered unemployed. Students, homemakers, or retired individuals who are not seeking work are not counted as unemployed.

In the Indian context, unemployment manifests in several forms, particularly in rural and urban areas.

Seasonal Unemployment

Seasonal unemployment occurs when people are employed only during certain seasons of the year. It is a widespread phenomenon in India's agricultural sector. Agricultural operations like sowing, weeding, harvesting, and threshing are seasonal activities. During the off-season, when there is little agricultural work to be done, millions of farm labourers and even small farmers find themselves unemployed. Industries like sugar mills or ice factories also exhibit seasonal demand for labour.

Disguised Unemployment

Disguised unemployment is a unique feature of the agricultural and unorganised sectors in India. It is a situation where more people are engaged in a job than are actually required. Even if some workers are withdrawn, the total output will not fall. The marginal productivity of these extra workers is zero or close to zero.

For example, if a small family farm of one hectare requires only three people to cultivate it optimally, but five family members are working on it, the two extra people are examples of disguised unemployment. They appear to be employed, but their contribution to production is not significant. This is a form of underemployment and is a major reason for low productivity in Indian agriculture.

Educated Unemployment

Educated unemployment is a major problem, especially in urban India. This refers to a situation where educated and skilled individuals are unable to find jobs that match their qualifications and skills. Every year, millions of graduates and post-graduates from Indian universities enter the job market, but the economy does not generate enough suitable white-collar jobs to absorb them. This leads to immense frustration among the youth and represents a significant waste of human capital.

Government And Employment Generation

The Government of India has a dual role in addressing the challenges of employment and unemployment. It acts as a direct employer through its various departments, enterprises, and public sector undertakings, and it also acts as a facilitator by creating policies and an environment conducive to employment generation in the private sector.

Over the years, the government has launched numerous schemes and programs aimed at generating employment, both directly and indirectly.

Direct Employment Generation Programmes

These programs aim to create jobs directly by funding public works or providing wage employment.

• Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), 2005: This is a landmark legislation that guarantees 100 days of wage employment in a financial year to any rural household whose adult members volunteer to do unskilled manual work. It aims to enhance livelihood security in rural areas while also creating durable assets like roads, canals, and ponds.

Indirect Employment Generation and Skill Development Programmes

These programs aim to promote self-employment, boost industrial growth, and enhance the skills of the workforce to make them more employable.

• Skill India Mission: Launched in 2015, this initiative aims to provide vocational training and certification to Indian youth to make them skilled for specific trades and jobs.
• Make in India: An initiative to encourage companies to manufacture their products in India. The goal is to make India a global manufacturing hub, which in turn would create millions of jobs in the secondary sector.
• Start-up India: This program aims to build a strong ecosystem for nurturing innovation and start-ups in the country, which can become major job creators.
• Pradhan Mantri MUDRA Yojana (PMMY): Provides loans at low rates to non-corporate, non-farm small/micro-enterprises to encourage self-employment.

These government interventions are crucial for tackling unemployment and improving the overall employment scenario in the country.

Conclusion

The employment landscape in India is complex and multifaceted. While the economy has grown, it faces persistent challenges of jobless growth, a slow structural shift in employment, and a vast, vulnerable informal sector where over 90% of the workforce is engaged. The issues of low female worker-population ratio and high rates of disguised, seasonal, and educated unemployment continue to be major concerns.

The path forward requires a multi-pronged strategy. There is a need to focus on promoting labour-intensive manufacturing to absorb the surplus labour from agriculture. Simultaneously, enhancing the productivity of the agricultural sector is crucial for improving rural livelihoods. Investing in education, health, and skill development is essential to harness India's demographic dividend—its large young population.

Government policies and programs like MGNREGA, Skill India, and Make in India are steps in the right direction. However, their effective implementation, coupled with reforms that encourage private investment and entrepreneurship, will be key to generating quality employment for millions and ensuring inclusive and sustainable development for the nation.